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Hospitals Worry Medicaid, Obamacare Changes Could Bring Pain

With the potential for major changes in federal health care policy looming, hospital leaders are watching closely, worried especially that cuts to Medicaid could bring a big financial hit and that a repeal of Obamacare could raise the number of uninsured Connecticut residents.

Borgstrom: “I worry that we’re going to go back to growing the number of people who just come in and don’t have any insurance.

Barnes: “Hospitals think that we’ve been underfunding them for the last few years anyways.”

“With all of the uncertainty that is coming out of Washington now, we’re obviously very concerned,” said Dr. Rocco Orlando, senior vice president and chief medical officer at Hartford HealthCare, the parent company of Hartford, Backus and Windham hospitals, The Hospital of Central Connecticut, and MidState Medical Center.

In contingency planning, Hartford HealthCare’s worst-case scenario involves Medicaid: the possibility that the federal government will shift from its open-ended funding approach to giving the state a lump-sum of money – and reduce funding by 25 percent.

Hospital leaders also worry about the effects of repealing Obamacare – a top agenda item for President-elect Donald J. Trump and Congressional Republicans.

“I worry that we’re going to go back to growing the number of people who just come in and don’t have any insurance,” said Yale New Haven Health President and CEO Marna Borgstrom, whose hospital system includes Yale-New Haven, Bridgeport, Greenwich and New London’s Lawrence + Memorial hospitals, as well as Westerly Hospital in Rhode Island.

The Affordable Care Act cut billions of dollars from Medicare payments to hospitals, and hospital trade organizations have warned that if the health law is dismantled without repealing the cuts, hospitals could end up with more uninsured patients without the funding to help offset the cost of caring for them.

“If the law is repealed and the cuts remain in place, Connecticut hospitals’ fiscal stability and sustainability, as well as patient access to care, will be compromised,” according to Elizabeth Hamilton, a spokeswoman for the Connecticut Hospital Association. She added the association is “deeply concerned” about how patients would be affected if the health law is repealed.”

But hospital leaders say they haven’t changed their strategy in one key area – planning for a significant shift in how care is paid for and delivered, from one that largely pays for each test, visit or procedure, to one that ties compensation to patient outcomes. The federal government has pushed this change – which also has been embraced by private insurance companies – but hospital officials say they don’t anticipate that to change with the new administration.

THE FUTURE OF MEDICAID

Hospital leaders say Medicaid is the biggest question on their minds when it comes to potential changes in federal policy.

Medicaid currently covers nearly 750,000 state residents, including close to 200,000 who became eligible under Obamacare. The federal government currently reimburses the state for 100 percent of the cost of those added under Obamacare (it will drop to 95 percent as of Jan. 1), compared to 50 percent for those who were previously eligible. This fiscal year, federal funding for Medicaid is expected to bring the state $3.5 billion; the state is expected to spend another $2.4 billion, making it the largest line item in the state budget.

Currently, the federal government reimburses states for a portion of whatever they spend on Medicaid. Under the models advocated by Trump and House Republicans, the federal government would instead give states a set amount of money to spend on the program. Under one model, block grants, which Trump has advocated, states would get a set total amount to spend on the program. Another model, included in a plan released in June by House Republicans, would give states the option of getting a set amount for each person covered.

Benjamin Barnes, Gov. Dannel P. Malloy’s budget director, said in a November interview with The Mirror that a major drop in Medicaid funding could lead to cuts for health care providers. “Hospitals think that we’ve been underfunding them for the last few years anyways. I think that would become more acute,” Barnes said.

And Barnes said that if the administration had to cut Medicaid spending, he’d prefer to start with payment rates for health care providers.

While a block grant-type system could leave the state with less money to spend, Borgstrom raised another concern: Since federal funding wouldn’t be directly tied to what states spent on Medicaid coverage, states could have more leeway to direct the federal dollars toward other purposes.

“My concern is that the state’s financial issues are real, but that they, when given block grant money, are not going to be incented to put it in health care. They’re going to use it to stretch to cover other things,” Borgstrom said. “My fear is that over time, that will make all of us less and less viable.”